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Recent Developments in the Economics of Price Discrimination

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  • Mark Armstrong

    (University College London)

Abstract

This paper selectively surveys the recent literature on price discrimination. The focus is on three aspects of pricing decisions: the information about customers available to firms; the instruments firms can use in the design of their tariffs; and the ability of firms to commit to their pricing plans. Developments in marketing technology mean that firms often have access to more information about individual customers than was previously the case. The use of this information might be restricted by public policy towards customer privacy. Where it is not restricted, firms may be unable to commit to the use they make of the information. With monopoly supply, an increased ability to engage in price discrimination will boost profit unless the firm cannot commit to its pricing policy. With competition, the effects of price discrimination on profit, consumer surplus and overall welfare depend on the kinds of information and/or instruments available to firms. The paper investigates the circumstances in which price discrimination causes all prices (and hence profit) to fall.

Suggested Citation

  • Mark Armstrong, 2005. "Recent Developments in the Economics of Price Discrimination," Industrial Organization 0511004, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0511004
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    References listed on IDEAS

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    2. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 33, pages 2145-2220, Elsevier.
    3. Chang, Jen-Wen, 2020. "Monitoring and competing principals: A double-edged sword," Journal of Economic Theory, Elsevier, vol. 189(C).
    4. Mateusz Mokrogulski, 2008. "Dyskryminacja cenowa poprzez sprzedaż pakietową," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 9, pages 51-71.
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    6. Bouckaert, J.M.C. & Degryse, H.A., 2006. "Opt In versus Opt Out : A Free-Entry Analysis of Privacy Policies," Other publications TiSEM 17393c5d-1ed2-47ec-bc96-9, Tilburg University, School of Economics and Management.
    7. Charlson, G., 2021. "Third-Degree Price Discrimination in the Age of Big Data," Cambridge Working Papers in Economics 2159, Faculty of Economics, University of Cambridge.

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    Keywords

    Price discrimination; oligopoly; dynamic pricing;
    All these keywords.

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    • L - Industrial Organization

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